HQ 555203: Applicability of duty exemptions under HTSUS subheadings 9801.00.10 and 9802.00.80 to core elements of catalytic converters assembled in Japan

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                      HQ 555203

                                  December 12, 1988

          CLA-2 CO:R:C:V 555203 GRV

          CATEGORY:  CLASSIFICATION

          TARIFF NO.:  9801.00.10; 800.00; 9802.00.80; 807.00

          John E. Brady
          Bill White, Inc.
          Customs Brokers
          P.O. Box 92756
          Los Angeles, California 90009-2756

          RE:  Applicability of duty exemptions under HTSUS subheadings
               9801.00.10 and 9802.00.80 to core elements of catalytic
               converters assembled in Japan

          Dear Mr. Brady:

                This is in response to your letter of November 22, 1988,
          on behalf of TABC, Inc., requesting a ruling on the applicability
          of subheading 9801.00.10, Harmonized Tariff Schedule of the
          United States (HTSUS) (item 800.00, Tariff Schedules of the
          United States (TSUS)), to substrate elements of catalytic
          converters to be returned to the U.S. as part of motor vehicles
          from Japan.

          FACTS:

                You state that the basic elements of a catalytic converter
          are the substrate--a coated ceramic element which forms the core
          --and the steel casing enclosing the substrate.  You advise that
          substrate elements of U.S. origin will be purchased by your
          client and chemically coated at its facility in Long Beach,
          California.  The coated elements will then be exported to Japan
          where they will be placed into steel casings which will be welded
          shut.  The completed catalytic converters will then become part
          of exhaust systems, which, in turn, will be installed into motor
          vehicles to be imported into the U.S.

                You maintain that the coated substrate elements will not be
          subjected to any processing, other than packing for export,
          following their manufacture in the U.S.

          ISSUE:

                Whether the U.S. products to be exported (substrate
          elements) will qualify for the duty exemption available under
          HTSUS subheading 9801.00.10 (TSUS 800.00) or subheading
          9802.00.80 (TSUS 807.00) when returned to the U.S.











                                       - 2 -


          LAW & ANALYSIS:

                Effective January 1, 1989, the Harmonized Tariff Schedule
          of the United States (HTSUS) will supercede and replace the Tar-
          iff Schedules of the United States (TSUS).  TSUS items 800.00 and
          807.00 will be carried over into the HTSUS without change as
          subheadings 9801.00.10 and 9802.00.80, respectively.  HTSUS
          subheading 9801.00.10 provides for the free entry of U.S.
          products that are exported and returned without having been
          advanced in value or improved in condition by any means while
          abroad.

                In regard to the instant case, we believe that the assembly
          in Japan of coated substrate elements of U.S. origin with foreign
          steel casings to form completed catalytic converters, and the
          subsequent assembly of the converters with other foreign compo-
          nents to create motor vehicles, clearly advances the value and
          improves the condition of the substrate elements.  This is self-
          evident from the fact that the substrate elements to be exported
          from the U.S. will not become capable of performing the function
          for which they are designed until after the assembly operations
          to be performed abroad.

                However, the information submitted indicates that an allow-
          ance in duty for the value of the substrate elements may be made
          under HTSUS subheading 9802.00.80 upon importation of the motor
          vehicles from Japan.  This tariff provision applies to articles
          assembled abroad in whole or in part of fabricated components,
          the product of the U.S., which were exported in condition ready
          for assembly without further fabrication, have not lost their
          physical identity in such articles by change in form, shape or
          otherwise, and have not been advanced in value or improved in
          condition abroad except by the assembly operation and operations
          incidental thereto.  An article entered under HTSUS subheading
          9802.00.80 is subject to duty upon the full appraised value of
          the imported article, less the cost or value of such products of
          the U.S.

                Placing the coated substrate elements into steel casings
          abroad and welding the casings shut constitutes an acceptable
          assembly operation for purposes of HTSUS subheading 9802.00.80
          (see section 10.16(a), Customs Regulations (19 CFR 10.16(a))).
          Moreover, the subsequent joining of the catalytic converter to
          other components to form the exhaust system, and the joining of
          the exhaust system to the motor vehicle, will not preclude appli-
          cation of this partial duty exemption to the motor vehicles to be
          imported.














                                        - 3 -


          HOLDING:

                On the basis of the information submitted, as the U.S. sub-
          strate elements will be advanced in value and improved in condi-
          tion abroad as a result of the welding assembly operation, the
          substrate elements will not qualify for the duty exemption under
          HTSUS subheading 9801.00.10.  However, allowances in duty may be
          made under HTSUS subheading 9802.00.80 for the cost or value of
          the coated substrate elements of U.S. origin when they are re-
          turned to the U.S. as part of the exhaust systems of motor vehi-
          cles from Japan, upon compliance with the applicable Customs
          Regulations (19 CFR 10.11-10.24).


                                        Sincerely,





                                        John Durant, Director
                                        Commercial Rulings Division






































          CO:R:C:V:VILDERS:GRV:12/07/88:12/09/88